Venture capital investment leaps in Maryland

Third-quarter total climbs to $167.0M, even as national figures slump

Columbia marketing agency Merkle snagged $75 million in venture capital investments, the second largest grab in the nation in the third quarter, according to the MoneyTree report released Friday by PricewaterhouseCoopers and the National Venture Capital Association.

That investment, from Technology Crossover Ventures in California, led a big venture capital bounce for Maryland companies in the quarter. All told, investors pumped some $167.0 million into state companies in the third quarter, up from $102.1 million in the second quarter. The number of deals, however, fell to 21 from 26 in the previous quarter.

The $167.0 million total was the most since the fourth quarter of 2008, when investors poured more than $171 million into state companies.

Maryland's recent showing was in contrast to the national picture, according to the survey. Third-quarter VC investments nationwide fell to $4.8 billion from $6.9 million in the second quarter, with the number of deals dropping to 780 from 962.

Also, VC investments in neighboring Virginia plunged in the third quarter, to $62.1 million from $124.2 million the previous quarter, with the number of deals also falling, to eight from 18.

Merkle's later-stage investment, which was received in August, allowed the company to fund the rapid expansion of its customer relationship marketing, marketing technology and digital marketing capabilities, as well as access to Technology Crossover Ventures' network and industry experience, according to Merkle information.

"The investment by [Technology Crossover Ventures] is happening at a pivotal time in the marketing industry. Companies are actively embracing customer relationship marketing and looking to expand and optimize their marketing across media and channels," Merkle CEO David Williams said in a statement at the time.

Technology Crossover Ventures invested in Merkle because of the company's 20-year track record of innovation and success, serving as a long-term partner to many of the world's most highly recognized companies and organizations, Technology Crossover principal David Yuan said in a statement released in August. Yuan also has joined Merkle's board of directors.

Neither company immediately returned requests for comment.

Other significant Maryland investments in the third quarter included $15 million in seed funding from New Enterprise Associates of Chevy Chase to Zygenia in Gaithersburg and $14.9 million in early-stage funding to Nora Therapeutics in Owings Mills. The Nora investment came from Burill & Co., Prospect Venture Partners, Rho Capital Partners and Vivo Ventures.

Julia Spicer, executive director of the Mid-Atlantic Venture Association in McLean, Va., said she was particularly interested in the influx of early-stage investments over the last year. The first rounds of first-time financing accounted for 26 percent of all investment dollars and 33 percent of all deals in the third quarter, compared with 15 percent of all dollars and 25 percent of all deals for the same time last year, according to PricewaterhouseCoopers. The third quarter was also the fourth consecutive quarter in which more than $1 billion was invested nationally in companies for the first time.

"Super angels are learning they can put a small amount of money into [information technology] companies, with the prospect of a good growth opportunity," she said. "It's positive news that we're seeing influxes in early investment, even though investment is showing an overall downward trend."

Spicer said her group does everything possible to encourage angel and first-time investments.

"Good ideas led by tenacious people will find capital. It's just an uphill climb right now," she said.

Nationally, the biotech industry slid a bit in the third quarter, to $943.7 million from $1.38 billion in the second quarter.

"While overall funding in traditionally strong sectors like life sciences and popular clean technology were down, biotechnology continued to bring in significant funding while software took the lead as the top generator of VC dollars in Q3," Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said in a statement.